Subsidizer for networked loan market and lending management system

ABSTRACT

Systems, methods, and apparatus for receiving a plurality of borrowing orders from a plurality of borrowers; receiving a plurality of lending orders from a plurality of lenders; receiving at least one subsidizer order from a loan subsidizer that includes one or more loan subsidizing terms; and executing a matching algorithm to match at least some of the borrowing orders with at least some of the lending orders, wherein the result of the executed match is affected by the existence of the at least one subsidizer order.

RELATED APPLICATIONS

The present application is a continuation of U.S. application Ser. No.11/501,057, filed Aug. 9, 2006, and titled “Networked Loan Market andLending Management System,” which claims priority from U.S. ProvisionalPatent Application No. 60/706,751, filed on Aug. 10, 2005, and U.S.Provisional Patent Application No. 60/796,857, filed on May 3, 2006, thecontents of which are incorporated herein by reference.

FIELD AND BACKGROUND OF THE INVENTION

The present invention relates to generating and processing lending andborrowing transactions and more particularly, but not exclusively to asystem and a method for generating and processing lending and borrowingtransactions by means of matching between borrowers and lenders.Borrowed money is a primary source of capital for both businesses andconsumers. Banks and other financial institutions are the primaryfacilitators, bridging between lenders and borrowers, managing risks andcollecting fees in the process.

Banks borrow money from depositors through certificates of deposit,checking accounts, money market accounts and other debt instruments.Depositors lend their money to the bank against the bank's balancesheet, relying partly on government insurance (such as the FederalDeposit Insurance Corporation—FDIC) and government regulation. The bank,in turn, lends this money to both business and consumers. It is thebank's responsibility to assess the lending risk, to verify collaterals,to manage the flow of funds and to take action in cases of delinquencyby borrowers. No direct contractual relationship exits between theoriginal lenders and the eventual borrowers who receive the money fromthe bank.

Governments, Government Agencies and commercial enterprises routinelyissue bonds and other debt instruments. With the exception of governmentissued debt instruments, such securities carry the credit risk of theissuers, are relatively liquid (say, traded at various exchanges), andhave preset maturity schedules (the schedules of repayments by dates andamounts), and prepayment options. Bonds are usually issued with respectto large sums of money.

Banks and other financial institutions package and sell many other formsof debt securities and debt derivatives. In essence, in these packages,a number of loans (each with its terms and conditions and risks profile)are owned by a single entity, whose securities (debt or equity) aredirectly linked to the risks and the performance of the loans orderivatives owned by the entity. There is no direct contractualrelationship between the securities holders of such entity and theborrowers who receive the packaged loans.

Micro-Lending, within and outside the traditional banking sector,involves lending of relatively small amounts (typically less than$25,000), to micro entities (individuals or organizations) who lack thecollateral or the capacity to convince traditional banks that they areable to repay a loan, and are therefore considered a risky client group.Micro entities frequently have limited track record or financialreporting capacity. The costs of processing small loans and the risksinvolved in lending to micro entities make financial institutionshesitant to develop services for micro entities and small timeentrepreneurs. All these factors limit the access to credit availablefor micro entities.

There are key differences in the service delivery principles ofmicro-versus traditional lending. Micro lending is characterized by itssmall loan size, the non-traditional aspects of collateral requirementsand assessment of credit worthiness, and quick and easy access. Therelatively high transaction costs of micro-lending are covered eitherthrough above market level interest rates or subsidies. No directcontractual relationship exits between the sources of capital used bythe micro-lenders and the eventual micro-borrowers who receive themoney.

Financial exchanges allow buyers and sellers to trade various types ofsecurities (stocks, bonds, futures, options). Taking orders from bothbuyers and sellers, these exchanges match sell or buy orders forindividual securities based on price and quantity, to generate trades.

With the rise of the Internet, and the growth of e-commerce, a new breedof exchanges, i.e. electronic marketplaces, has developed. Thesemarketplaces, used mainly as auctions for trading goods, are eitherConsumer-to-Consumer (C2C) marketplaces (such as eBay™),Business-to-Business service providers (B2B) (such as Fiber2Fashion™),or Business-to-Consumer (B2C) service providers (such as yahoo.com™).

Currently, there are a few electronic market lending places. Forexample, Prosper Marketplace Inc. offers an electronic marketplace whereborrowers may organize in a group, for negotiating better loan rates forthe group.

In another example, Zopa Ltd. offers a web site where lenders may definethe minimum required credit rating of the borrowers (according to asingle rating agency) and the desired interest rate. Only borrowersrated by the single rating agency may choose to agree to the loan terms.The funding offered by the lender under the loan terms is arbitrarilydivided between the borrowers that meet a specific credit rate, suchthat each borrower is allocated a small chunk of the funding (less than1/50).

Both financial exchanges and electronic marketplaces implement one ormore auction mechanisms to match buy orders and sell orders, forgenerating transactions. An auction is defined as any negotiationmechanism that is: mediated, well-specified (i.e., runs according toexplicit rules) and market-based (i.e., determines an exchange in termsof standard currency).

Auctions can be either single dimensional—where the only bid dimensionsare price and quantity of a single good, or multi-dimensional—whereother attributes of the goods are also negotiated. For example, if thegoods are loans, the other attributes may include the collateralsoffered by the borrowers. Single dimensional auctions can be furthersubdivided into one-sided auctions and two-sided auctions.

Two-sided auctions include the Continuous Double Auction (CDA) and CallMarket (periodic clear) types described herein below.

Two-sided auctions form the basis of many of today's financialexchanges. For example, NASDAQ has a Continuous Double Auction process,in which every new order is matched immediately if possible, and theremaining orders are put on the order book. The Arizona Stock Exchange(AZX) operates a Call Market (“periodic clear”) in which orders arematched periodically.

Multi-dimensional auctions include multi-attribute (matching a singlegood with multiple attributes) and multi-good mechanisms.

An auction operator performs three types of activities: receiving bids,disseminating information and arranging trades (clearing). Therefore, inanalyzing the different types of auctions, one can use three dimensions:bidding rules, clearing policy and information revelation policy.

Current systems and methods for processing lending and borrowingtransactions have several disadvantages.

Businesses and consumers commonly borrow at local banks or financialinstitutions having specific knowledge and information about the localmarket, the community and often the individual borrowers.

The emergence of credit reporting agencies and the Internet havebroadened the access to such information, but have not eliminated thetrust and long-term relationships aspects of lending and borrowingdecisions. Lenders without local presence have only limited directaccess to local borrowers. Similarly, borrowers are limited in theiraccess to lenders without local presence.

The banking system is characterized by high costs. The high costsinclude both fixed costs, such as: fixed assets (branch offices,distributed IT infrastructure, etc.), and variable costs of operation,which include required capital reserves expensive workforce, informationsystems services, insurance, and regulatory costs.

The costs include both operational costs (bank branch operation costs,salaries, providing local physical points of service to the public), andfinancial costs associated with the fact that banks need to holdreserves that cover the risk associated with the fact that the bank is apart of the transaction

The high costs are reflected by a large spread between the interestrates paid to lenders and those collected from borrowers.

The fact that the loan market is characterized by a limited number ofmega banks and financial institutions using a limited number of lendingpolicies, limits the options available to a specific borrower based onhis unique circumstances.

Most banks and lending institutions utilize a limited number ofinflexible lending processes. The limited and inflexible processesprevent a potentially major increase in the number of lenders able tomanage their risk in a different way, which would have resulted, hadthere been more flexible lending processes available.

More flexible lending processes may create higher yield for the lendersand more options for the borrowers. (i.e., a partial advance against thetotal amount of the loan before verifying the collaterals, a lowerinterest rate in return for a portion of the borrower's earning from aparticular activity, additional means of payment such as barteredservices, etc.).

Currently, lending institutions, banks, and other financial institutionsdeal with very limited and finite number and types of risk profiles.Consequently, the financial institutions lack the ability to addressvery specific situations that current risk profiles fail to address.Different lenders may have different subjective risk assessment of thesame borrower. For example lending to a Chinese borrower may be deemedsafe for one lender and too risky to another lender. More opportunitieswill be available if many borrowers and lenders participate in a largemarket where each of them can find what he considers the best deal.

Borrowers of small amounts from thousands of Dollars to a few MillionDollars are limited in their ability to issue public debt securities.Even if they can issue such securities, the cost may be prohibitivelyhigh and the regulatory requirements may be complex. For example, thereis a need to meet the Sarbanes-Oxley (SOX) requirements. Sarbanes-Oxley(SOX) is a US law which was passed in 2002, and aims at strengtheningcorporate governance and restoring investor's confidence.

Consumers and many businesses invest their short term cash surpluses inlow interest money market accounts because they do not have a better wayto maximize their gain from small amounts available for relatively shortperiods.

The public market for small debt issues is very limited and illiquid andthere is almost no market for non-public debt issues.

Currently, lenders lack the ability to leverage their knowledge orassessments in lending to particular industries, geographies, or otherprofiles of entities. That as to say, the lenders have to trust a bankor another financial institution to make the decisions that arereflected in the interest rate available to them. The interest rate isbased on average costs and risks across a very big loan portfolio of thebank in general, rather than a target subpopulation of borrowers thelenders are willing to finance.

Current lending processes represent cumbersome, inefficient and costlyprocesses that were appropriate in the past. The processes fail to weightogether the needs of borrowers, lenders, and other parties involved inthe lending process. Current lenders and borrowers face a rather limitednumber of choices, with regards to the lenders/borrowers,lending/borrowing support services—which are limited to traditionalbanking systems, etc.

There is thus a widely recognized need for, and it would be highlyadvantageous to have, a system and a method, devoid of the abovelimitations.

SUMMARY OF THE INVENTION

Preferred embodiments of the present invention provide in one aspect aflexible loan market and/or a lending management system.

The above aspect provides for such a flexible loan market that is opento borrowers and lenders large and small.

The flexibility of the loan market allows each user, whether acting as aborrower or a lender, to get the terms that best suit him.

The loan market is preferably networked and allows participants to actas borrowers, lenders, and subsidizers. The loan market manages loansthroughout their lifetime from inception to completion of repayment.That is to say it manages the matching of borrowers to lenders andsubsidizers at the start creating one or more composite loan andportfolio loans each made of one or more atomic loans. The loan marketmanages collection of finds from lenders and transferring composite loanfinds to borrowers, collecting repayment funds from borrowers,allocating such repayment funds among the portfolio loans andtransferring repayment amounts to lenders. The loan market collectsfunds from subsidizers at the appropriate time, and distribute themaccording to the terms of the subsidy. It also manages the sale andtransfer of a loan from lender to lender

The operational aspects of the market may be carried out by a network ofthird parties, certified and orchestrated by the market operation.

According to one aspect of the present invention there is provided anapparatus for generating and processing lending and borrowing orders,comprising: a borrowing order receiver, configured to receive at leastone borrowing order from at least one borrower, the borrowing ordercomprising borrower-requested loan terms, a lending order receiver,configured to receive at least one lending order from at least onelender, the lending order comprising lender-requested loan terms, and amatcher, associated with the borrowing order receiver and the lendingorder receiver, and configured to automatically provide at least onematch to a respective current lending order from amongst the borrowingorders, such that the matched orders are mutually satisfied with respectto the loan terms.

According to a second aspect of the present invention there is provideda method for generating and processing lending and borrowing orders,comprising: receiving at least one borrowing order from at least oneborrower, the borrowing order comprising borrower-requested loan terms,receiving at least one lending order from at least one lender, thelending order comprising lender-requested loan terms; and automaticallyproviding a match to a current lending order from amongst the borrowingorders, such that the matched orders are mutually satisfied with respectto the loan terms.

According to a third aspect of the present invention there is providedan apparatus for managing a workflow of processes for initiating andexecuting composite loans and portfolio loans as well as the processesof collecting, aggregating and distributing funds.

According to a fourth aspect of the present invention there is provideda method for managing the life cycle of composite loans and portfolioloans from initiation, signing the loans agreements, handlingcollaterals, monitoring the collection and distribution of funds,handling uncollected obligations and issuing appropriate reports.

Unless otherwise defined, all technical and scientific terms used hereinhave the same meaning as commonly understood by one of ordinary skill inthe art to which this invention belongs. The materials, methods, andexamples provided herein are illustrative only and not intended to belimiting.

Implementation of the method and system of the present inventioninvolves performing or completing certain selected tasks or stepsmanually, automatically, or a combination thereof. Moreover, accordingto actual instrumentation and equipment of preferred embodiments of themethod and system of the present invention, several selected steps couldbe implemented by hardware or by software on any operating system of anyfirmware or a combination thereof. For example, as hardware, selectedsteps of the invention could be implemented as a chip or a circuit. Assoftware, selected steps of the invention could be implemented as aplurality of software instructions being executed by a computer usingany suitable operating system. In any case, selected steps of the methodand system of the invention could be described as being performed by adata processor, such as a computing platform for executing a pluralityof instructions.

BRIEF DESCRIPTION OF THE DRAWINGS

The invention is herein described, by way of example only, withreference to the accompanying drawings. With specific reference now tothe drawings in detail, it is stressed that the particulars shown are byway of example and for purposes of illustrative discussion of thepreferred embodiments of the present invention only, and are presentedin order to provide what is believed to be the most useful and readilyunderstood description of the principles and conceptual aspects of theinvention.

In this regard, no attempt is made to show structural details of theinvention in more detail than is necessary for a fundamentalunderstanding of the invention, the description taken with the drawingsmaking apparent to those skilled in the art how the several forms of theinvention may be embodied in practice.

In the drawings:

FIG. 1 a is a block diagram schematically illustrating a loan marketimplementing an apparatus according to a preferred embodiment of thepresent invention.

FIG. 1 b is a block diagram illustrating a first apparatus forgenerating and processing lending and borrowing orders, according to apreferred embodiment of the present invention.

FIG. 1 c is a flowchart illustrating a method for collection management,according to a preferred embodiment of the present invention.

FIG. 2 is a block diagram illustrating a second apparatus for generatingand processing lending and borrowing orders, according to a preferredembodiment of the present invention.

FIG. 2 a is a block diagram mapping clusters of processes carried out byan apparatus for loan market management, according to a preferredembodiment of the present invention.

FIG. 2 b is a second block diagram mapping processes carried out by anapparatus for loan market management, according to a preferredembodiment of the present invention.

FIG. 3 is a flowchart illustrating a first method for generating andprocessing lending and borrowing orders, according to a preferredembodiment of the present invention.

FIG. 4 is a flowchart illustrating a method for handling userinteractions, according to a preferred embodiment of the presentinvention.

FIG. 4 a is a flowchart illustrating a method for external conditionsverification, according to a preferred embodiment of the presentinvention.

FIG. 5 is a flowchart illustrating a method for user management,according to a preferred embodiment of the present invention.

FIG. 5 a is a flowchart illustrating a method for user rating, accordingto a preferred embodiment of the present invention.

FIG. 5 b is a flowchart illustrating a method for user collateralmanagement, according to a preferred embodiment of the presentinvention.

FIG. 6 a is a flowchart illustrating a method for borrowing orderreceiving and management, according to a preferred embodiment of thepresent invention.

FIG. 6 b is a flowchart illustrating a method for signatureverification, according to a preferred embodiment of the presentinvention.

FIG. 7 is a flowchart illustrating a method for lending order receivingand management, according to a preferred embodiment of the presentinvention.

FIG. 8 is a flowchart illustrating a method for managing a secondaryloan sale, according to a preferred embodiment of the present invention.

FIG. 9 a which is a block diagram illustrating an exemplary compositeloan and portfolio loan, according to a preferred embodiment of thepresent invention.

FIG. 9 b is a flowchart illustrating a method for contract management ofa composite loan, according to a preferred embodiment of the presentinvention.

FIG. 10 is a block diagram illustrating interactions between escrowservice providers and other parties in a loan market, according to apreferred embodiment of the present invention.

FIG. 10 a is a flowchart illustrating a repayment management method,according to a preferred embodiment of the present invention.

FIG. 11 is a flowchart illustrating a repayment management method basedon notices from escrow agents or banks, according to a preferredembodiment of the present invention.

FIG. 11 a is a flowchart illustrating a loan closing method, accordingto a preferred embodiment of the present invention.

FIG. 11 b is a flowchart illustrating a lender payment dispensingmethod, according to a preferred embodiment of the present invention.

DESCRIPTION OF THE PREFERRED EMBODIMENTS

The present embodiments comprise an apparatus and a method forgenerating and processing lending and borrowing orders and for managinga flexible loan market that is preferably networked and allowsparticipants to act as borrowers and lenders. As explained, the loanmarket manages loans throughout their lifetime from inception tocompletion of repayment. That is to say it manages the matching ofborrowers to lenders at the start. It manages transfer of the loan fromlender to lender and it manages repayment and default.

Preferred embodiments of the present invention relate to facilitatingand managing a method for concurrent direct lending and borrowingtransactions through a risk aware exchange. More particularly, apreferred embodiment of the present invention introduces a method forgenerating clusters of atomic loans that together match the risk profileand rates desired by lenders and acceptable to borrowers. A preferredembodiment of the present invention provides a method for managing thelife cycle of clusters of atomic loans by directing and coordinatingmultiple independent qualified service providers, as explained infurther detail herein below.

A preferred embodiment of the present invention may be implemented as aworkflow, handling a variety of transactions and operations: a requestfor external verification, waiting for external event, etc.

Reference is now made to FIG. 1 a, which is a block diagramschematically illustrating a loan market implementing an apparatusaccording to a preferred embodiment of the present invention.

An apparatus according to preferred embodiments of the present inventionmay be used by organizations, irrespective of whether they providebanking services in general, for supporting the actual execution of theloans through fund transfer

Optionally, the actual transfer of funds from the lender(s) 102 to theborrower(s) 101 and from the borrower(s) to the lender(s) (repayment)may be carried out by escrow agents communicated to by the apparatuswith appropriate money transfer requests. That is to say, the actualtransfer of money may be carried out by escrow agents rather than banks.The lender pays the escrow agent who transfers the money to theborrower(s). Money transfer by the escrow agents is described in greaterdetail herein below.

The present embodiments attempt at providing an optimized match betweenlenders 102 and borrowers 101 and a solution which is appropriate forlending to private customers or micro-lending.

Preferred embodiments of the present invention may allow replacing banksin general and handling of loans of any type or magnitude, notnecessarily between private customers or micro-lending

Preferred embodiments of the present invention provide an apparatus formanaging a loan market 100 a, as described in further detail hereinbelow. Optionally, the loan market is implemented as a part of a website, such that Internet users may communicate with the apparatus forposting borrowing orders, lending orders, etc, as described in furtherdetail herein below.

In a loan market managed using an apparatus according to preferredembodiments of the present invention, lenders 102 may offer to lendfunding, using lending orders LO1, LO2. A lending order (LO) definesgeneral lending terms proposed by a certain lender 102 for funding aloan. The lending terms are not specific with respect to a certainborrower, but rather define general terms the lender is willing to lendunder.

The lending terms may include, but are not limited to: the amount to belent, the target risk the lender is willing to assume, the type ofalgorithm used to calculate the risk taken and the specific parametersused in such algorithm, (including the type and amount of collaterals,the geographic location of the borrower, the use of the funds, thebusiness type of the borrower, the financial condition of the borrower,the desired period(s) (or alternative periods), the minimum interestrates, and any other term associated with each acceptable set ofparameters).

Similarly, borrowers 101 may express their wish to borrow, usingborrowing orders BO1, BO2. A borrowing order (BO) is used to specifyborrowing terms. A borrowing order defines general borrowing termsproposed by a certain borrower 101. The borrowing terms are not specificwith respect to a certain lender, but rather define general terms theborrower is willing to borrow under, as described in greater detailherein below.

Then, a matching process is carried out, where a set of matches isprovided, where a lending order is matched with borrowing orders, suchthat the lending order and the borrowing orders are mutually satisfied,as described in further detail herein below.

Preferably, there may also be subsidizers 103, such as a governmentagency, a municipality, commercial entities that want to promote theirproducts and/or services (for example a car dealer that subsidizes loansfor new cars), etc. Subsidizers may participate in the loan market 100a, subsidizing certain loans, according to subsidizing terms defined bythe subsidizers 103, as described in further detail herein below.

Preferably, an apparatus according to a preferred embodiment alsosupports a secondary loan market 10 b.

In the secondary loan market 100 b, a lender 102 may put his position ina certain loan for sale, and another lender may buy the position, asdescribed in further detail herein below. Furthermore, a lender from thesecondary loan market 100 b may act as a seller 104. The seller (lender)104 offers his position in a loan traded in the secondary loan market100 b for sale in the loan market 100 a managed by the apparatus of thepresent invention's embodiment, as described in further detail hereinbelow.

The secondary loan market is actually the same market in which existingloans are offered for sale by lenders who hold them and other lenderswho buy the loans. That is to say, the buyer in a secondary trade is alender who steps into the shoes of the original lender. In the eyes ofthe buyer (who is a lender), the atomic loan meets his criteria and hedoes not care (and maybe doesn't know) that the loan originates fromanother lender.

The principles and operation of a method and an apparatus according tothe present invention may be better understood with reference to thedrawings and accompanying description.

Before explaining at least one embodiment of the invention in detail, itis to be understood that the invention is not limited in its applicationto the details of construction and the arrangement of the components setforth in the following description, or illustrated in the drawings. Theinvention is capable of other embodiments or of being practiced orcarried out in various ways. Also, it is to be understood that thephraseology and terminology employed herein is for the purpose ofdescription and should not be regarded as limiting.

Reference is now made to FIG. 1 b, which is a block diagram illustratinga first apparatus for generating and processing lending and borrowingorders, according to a preferred embodiment of the present invention.

Apparatus 1000 includes a borrowing order receiver 110. The borrowingorder receiver 10 receives one or more borrowing order(s) in either anonline mode or a batch mode. (for example, the orders may first bereceived by a business partner or an agent, and later input to theborrowing order receiver in a batch process).

Orders that are created (both lending orders and borrowing orders) arethen stored in a database and processed by the matching system.

Optionally, the borrowing order receiver 110 communicates with one ormore borrower(s) over a communication network, for receiving theborrowing order(s). Preferably, the borrowing order receiver 110 isimplemented as a part of a web site, and communicates with theborrowers(s) over the Internet.

In each borrowing order, a borrower expresses his wish to borrow money.A borrowing order defines general loan borrowing terms proposed by acertain borrower. The loan borrowing terms are not specific with respectto a certain lender, but rather define general loan terms the borroweris willing to borrow under.

The loan borrowing terms in a borrowing order may include, but are notlimited to: the maximum effective interest rate and fees the borrower iswilling to pay, the borrower's desired period of the loan, the type ofloan the borrower is interested in (say, a balloon loan having a singlepayment due upon maturity of debt), etc.

The borrowing order also includes information about the borrowerhimself, such as—the borrower's name, his address, his tax ID., hisfinancial information, description of the borrower's business etc.

The borrower may also provide supporting information including availablecollaterals, or any other information that is usable for assisting theprocess of rating the risk of lending to the borrower.

Apparatus 1000 further includes a lending order receiver 120. Thelending order receiver 120 receives one or more loan lending order fromlender(s). Optionally, the lending order receiver 120 communicates withone or more lender(s) over a communication network, for receiving thelending order(s).

Preferably, the lending order receiver 120 is implemented as aninteractive process over the Internet, and communicates with thelender(s) over the Internet.

A lending order defines general loan lending terms proposed by a certainlender for the finding. The loan lending terms are not specific withrespect to a certain borrower, but rather define general loan terms thelender is willing to lend under.

The loan lending terms may include, but are not limited to: the amountto be lent, the target risk the lender is willing to assume, the type ofalgorithm used to calculate the risk taken and the specific parametersused in such an algorithm (including the type and amount ofcollaterals), the desired period(s) (or alternative periods), theminimum interest rates, and any other term. (e.g. requireddiversification), either within one loan or within the entire inventoryof loans held by the lender, in terms of geography, industry, loantypes, reluctance to lend to specific group of borrowers etc.

The apparatus 1000 further includes a matcher 130 which receives lendingorders and borrowing orders from their respective repositories andprocesses them.

The matcher 130 automatically provides a match to a current lendingorder from amongst the borrowing orders, such that the matched ordersare mutually satisfied with respect to the loan terms defined in theorders. The matcher may match many borrowers with each lender, so as tooptimally diversify the risk associated with each portfolio loan, asdescribed in further detail herein below.

The matcher 130 implements a matching method, as described herein below.

Preferably, the matching method is based on an optimization technique,as described in greater detail herein below.

For providing the match, the matcher 130 matches each lending order witha set of borrowing orders. The provided match translates into a loanfunded by the lender who issues the lending order. The loan ispreferably spread among multiple borrowers, as described in furtherdetail herein below.

Preferably, the loan is matched with respect to the lending termsdefined by the lender in the lending order and borrowing terms definedby the borrowers in their borrowing orders. Matching is optimized tosatisfy a preset utility function.

Preferably, the optimization takes into consideration all orders pendingin the cycle, yielding an optimized combination of resultant loans.

More preferably, the matcher 130 takes into consideration the riskassociated with each Borrowing Order (BO) including the rating (ifavailable) of each of the borrowers, the purpose of the loan, and anyother available and relevant information, in choosing which borrowingorders to match with the lending order, such that the lending order issatisfied with respect to lender-requested risk terms defined in thelending order, as described in further detail herein below.

Thus from the perspective of the lender, the lender holds a portfolioloan, satisfying his lending order, as discussed in greater detailherein below. The portfolio loan is comprised of atomic loans, eachrepresenting a direct contractual agreement between one lender and oneborrower.

Preferably, the borrowing orders matched with the lending order areselected by the matcher 130, so as to also satisfy the loan with respectto the borrowing terms defined by each of the borrowing orders. That isto say, from the perspective of the borrower, the borrower takes acomposite loan satisfying the borrowing terms as specified in hisborrowing order. The composite loan comprises atomic loans. Each atomicloan represents a direct contractual agreement between one lender andone borrower, as described hereinabove, but it is handled as a part ofthe composite loan for borrower's convenience.

For example, a borrower may wish to borrow $1200 and pay it off in equalmonthly payments, and issues a borrowing order bearing such loan terms.The borrower may take out a single atomic loan at 5% interest and payback $100 plus interest each month. Alternatively he may take acomposite loan split such that $500 are borrowed from the first lenderat 5% interest, $200 from a second lender who is prepared to lend at 2%for a whole year, and $500 from a third lender who charges 3% for a sixmonths loan.

Preferably, the apparatus 1000 further includes a secondary salemanager, for receiving a sale order from a first lender offering to sellhis position as a lender in a loan, and a buying order from a secondlender willing to buy the share of the first lender in the loan.

The secondary sale manager handles various aspects of the sale, andupdates data pertaining to the loans in databases of the apparatus 1000.Using the secondary sale manager, lenders may offer to sell theirpositions in one or more atomic loans or portfolio loans.

The sale order is used by a lender to express his will to offer aselection of his active loan(s) for sale. The lender may specifycriteria for selection of active loans from his loan portfolio, or mayspecifically identify certain loans for offering, etc.

Optionally, the buying order is not received directly from a lender, butis rather derived automatically from an original lending order, by thesecondary sale manager. The original lending order belongs to a lenderwho expresses his indifference with regards to the question whether thebuying order derived from his lending order is satisfied by a primaryloan, or through trading a loan in secondary sale.

Preferably, the apparatus 1000 further includes a subsidizer orderreceiver 140, connected with the matcher 130.

The subsidizer order receiver 110 receives one or more subsidizingorder(s) from loan subsidizers. For example, a government agency mayfunction as a loan subsidizer for students, low income earners, etc. Inanother example, a car dealer may offer subsidy for a specific make ormodel, in various forms, such as assuming the payment of interest on theloan, reducing the borrower obligation to repay by paying the firstpayment, etc.

In the subsidizing order, the subsidizer may define subsidizer loanterms for loans he wishes to subsidize. The subsidizer loan terms mayinclude but are not limited to: a profile of borrowers (students, lowincome earners, certain minority groups, etc), the level of subsidizing(covering part of the interest rate, providing part of the loaned sum ofmoney at preferred rate or terms, whether the amounts payable by thesubsidizer are paid up front or over the term of the loan, etc.), otherloan terms, etc.

Preferably, apparatus 1000 further includes a report generator.

The report generator may include a variety of reporting tools, andprovide an operator of the apparatus 1000 with reporting services. Thereports may also be provided to other users of the apparatus. Thereporting services may include but are not limited to: statisticalanalyses of orders, reports for auditing, tax reports, calculatedindexes (For example—normal interest rates in currently traded loans ina loan market managed by the apparatus 1000), etc.

Preferably, apparatus 1000 also includes an external loan marketinterface manager. The external loan market interface manager managescommunication between the apparatus 1000, and an external-apparatusmanaging a loan market external to a loan market managed by theapparatus 1000.

The interface managed by the external loan market interface managersupports processes between the two loan markets.

The processes supported by the interface may include, but are notlimited to: posting lending and borrowing orders on the external loanmarket, receiving lending and borrowing orders from the external loanmarket, receiving existing loan data from the external loan market (fortrading lender positions in the loans existing in the external market inthe loan market managed by the apparatus 1000), and sending existingloan data to the external loan market (for trading lender positions inloans existing in the loan market managed by the apparatus 1000 in theexternal loan market).

The processes may further include registering matching data pertainingto orders sent the external market and matched by the external-apparatusto orders in the external loan market, emulating users of theexternal-apparatus (lenders, borrowers, service providers, etc.)—toallow users of the apparatus 1000 to communicate with them, registeringservice providers of the external loan market by the apparatus 1000,etc.

Preferably, the external loan market interface manager managesinterfaces to multiple external-apparatuses. Each of the externalapparatuses manages a loan market external to a loan market managed bythe apparatus 1000.

Preferably, apparatus 1000 also includes a loan profile receiver, forreceiving a one or more loan profile(s) from a user. The loan profilecomprises default loan terms, to be used as default loan terms for anorder received from a borrower or a lender providing the loan profile.The profile may be specific to a certain user (lender, borrower,subsidizer, etc.), specific to a group of users, or general.

Preferably, apparatus 1000 also includes a collection manager, formanaging the processes related to debt collection. An exemplary debtcollection process as carried out by a collection manager according to apreferred embodiment of the present invention is provided in FIG. 1 c.

Preferably, the apparatus 1000 also handles a variety of additionalprocesses including but not limited to: collateral management, externalverification management, etc, as described in further detail hereinbelow.

Reference is now made to FIG. 2, which is a block diagram illustrating asecond apparatus for generating and processing lending and borrowingorders, according to a preferred embodiment of the present invention.

Apparatus 2000 includes an access controller 12, for controlling theaccess of users—lenders 4, borrowers 6, escrow agents 8, other serviceproviders 10, or any other users, to the apparatus 2000.

Optionally, the access controller 12 checks the user's ID and password.

Preferably, if the user is recognized and the password is correct, thecontroller 12 may use a predefined user-profile to prompt the user foradditional forms of authentication such as a physical token, a user key,or any other form of authentication, as defined by the operator of theapparatus 2000. Access to certain sensitive functions provided by theapparatus 2000 may require additional measures of authentication. Theadditional measures are performed by the controller 12 upon the attemptto exercise the sensitive functions.

Apparatus 2000 further includes a user manager 14 connected to theaccess controller 12.

The user manager 14 handles the management functions that involve usersof all types including: lenders, borrowers, or occasional authorizedusers. The management of users may include, but is not limited to: userregistration, fees, subscription handling, definition of user accessprofiles and authorizations, etc, as described in further detail hereinbelow.

Apparatus 2000 further includes a query and reporting manager 16.

The query and reporting manager 16 provides query and reporting servicesto the operator of the apparatus 2000. The query and reporting manager16 produces statistical analyses on requests, offers and fulfillments.

The query and reporting manager 16 also produces various reports andforms for audit and tax purposes. Reports may be generated as a routineactivity, as part of the auditing procedure, etc. The reports may bestored on magnetic media, to be retrieved and viewed upon request (sayas timed snapshots). The query and reporting services provided by thequery and reporting manager 16 are discussed in further detail hereinbelow.

Apparatus 2000 further includes order receivers 18, connected to theaccess controller 12. The order receivers 18 include the borrowing orderreceiver 110—for receiving borrowing orders and the lending orderreceiver 120—for receiving lending orders, as described for apparatus1000 hereinabove.

Apparatus 2000 further includes a matcher 20.

The matcher 20 automatically provides a match to current lending ordersfrom amongst the borrowing orders, such that the matched orders aremutually satisfied with respect to the loan terms defined in the orders.

For providing the match, the matcher 20 matches each lending order witha set of borrowing orders. The loan funded by the lender who issues thelending order is spread among multiple borrowers.

As discussed hereinabove above, the loan is matched with respect to thelending terms defined by the lender in the lending order and borrowingterms defined by borrowers in their borrowing orders. The optimizationin the matching process is based on a utility function that dictates thegoal of the optimization as described in detail herein below.

From the perspective of the lender, the lender holds a portfolio loan,satisfying the lender loan terms defined in his lending order, asdiscussed in greater detail herein below. Each of the loans in theportfolio loan is an atomic loan. An atomic loan represents a directcontractual agreement between one tender and one borrower.

Preferably, the borrowing orders matched with the lending order areselected by the matcher 20, so as to yield an optimized combinations ofatomic loans with respect to the utility function defined by anauthorized user.

From the perspective of the borrower, the borrower receives a compositeloan satisfying the borrowing terms as specified in his borrowing order.The composite loan comprises atomic loans. Each atomic loan represents adirect contractual agreement between one lender and one borrower, asdescribed hereinabove.

The matcher 20 may utilize different types of algorithms with varyingdegrees of complexity, for providing the match, as described in greaterdetail herein below.

Apparatus 2000 further includes a loan manager 22. The loan manager 22handles inter alia the actual execution of the atomic loans and thecomposite loans (say, using escrow agents), as described in furtherdetail herein below.

Preferably, the loan manager 22 also includes a workflow engine, whichhandles the various events and transactions involved in the life cycleof the atomic loans and the composite loans. The events and actionsinclude but are not limited to initiating, executing, and collecting aloan resultant upon the matching described hereinbelow.

Apparatus 2000 further includes one or more database(s) 26, for storinginformation relating to users of services provided by the apparatus 2000(lenders, borrowers, escrow agents, and others), to borrowing orders, tolending orders, to loans, to user profiles, to active content—such as upto date market trend analysis, quotes, etc.

The apparatus 2000 further includes an interface to data 24.

The interface to data 24 controls access to information stored in thedatabase 26. The interface to data 24 controls both authorization ofaccess and physical access (i.e., physical distribution of data recordsin the data bases 26, Web Services, servers, etc.). Optionally, thedatabases 26 are arranged as several different data stores for storing,updating and retrieving data on users, orders, loans, etc. Each datastore may have an audit trail (i.e., log) of changes made to thedatabase.

For example, the orders data store may be separated into severaldifferent data stores, one for logging every borrowing order, a secondfor logging every lending order, and a third for maintaining all loanprofiles used by the users of the apparatus 2000. A loan profile is usedby a lender to define the kind of loan he wishes to give. A loan profilemay be defined at the user level, at a group level, thus applying toorders placed by a lender or a borrower who belongs to the group, or ata general level, usable by any lender or borrower.

Reference is now made to FIG. 2 a, which is a block diagram mappingprocesses carried out by an apparatus for loan market management,according to a preferred embodiment of the present invention.

An apparatus according to a preferred embodiment of the presentinvention implements processes for interaction with the outside world210 (say, for managing the interaction with other loan markets), accesscontrol process 211—say, for controlling the access of users to datapertaining to the loans, order management 212 processes, administration213 processes, background service 214 processes, matching 215processes—for proving an optimized match amongst borrower's and lender'sorders, loan import/export 216 processes, loan life cycle management 217processes, market operation 218 processes, and service provider 219processes.

Reference is now made to FIG. 2 b which is a second block diagrammapping processes carried out by an apparatus for loan marketmanagement, in further detail, according to a preferred embodiment ofthe present invention.

In an apparatus according to a preferred embodiment of the presentinvention, the processes for interaction with the outside world mayinclude user access management 11, and use a gateway 200 for connectingtwo or more loan markets.

The apparatus may implement processes for finding a match 20 betweenborrowing orders and lending orders, as described in further detailherein below.

The apparatus may also implement order management processes: borrowingorder management 22, lending order management 24, subsidy ordermanagement 23, secondary sale order management 25, and loan profilemanagement 28, as described in further detail herein below.

Optionally, the apparatus may further implement administrationprocesses: user management 14, service provider management 13, etc., asdescribed in further detail herein below.

The apparatus may also implement loan export/import processes includingbut not limited to: external loan registration 18, and exporting loansto another loan market 19.

Preferably, the apparatus may implement loan management processes,including but not limited to: contract management 51, payment management31, loan closing 58, and loan sale 108.

The apparatus may also carry out processes for operating the loanmarket, including but not limited to: report management 82 processes(for defining and generating reports relating to the loans, to theborrowers and lenders, etc.), market parameter management 86 processes,etc.

Preferably, the apparatus also implements background processes, whichare activated by various events in the loan management, or initiatedbased on a pre-set cycle: collateral management 54, fund dispensing 59,reporting & queries 26, index publishing 84, collection management 56,subsidy management 72, external condition management 101, etc., asdescribed in further detail herein below.

Preferably, the apparatus further implements service provider processes,including but not limited to: escrow service management 120, ratingservices 122, legal service management 124, lending agent management126, insurance service management 128, information service management130, loan monitoring management 132, etc., as described in furtherdetail herein below.

Reference is now made to FIG. 3, which is a flowchart illustrating afirst method for generating and processing lending and borrowing orders,according to a preferred embodiment of the present invention.

In a method 3000 according to a preferred embodiment, a borrowing orderis received 310 from a borrower

In each borrowing order, a borrower expresses his will to borrow money,and defines his requested borrowing loan terms.

A borrowing order defines general borrowing loan terms proposed by acertain borrower. The borrowing loan terms are not specific with respectto a certain lender, but rather define general loan terms the borroweragrees to borrow under. The borrowing loan terms in a borrowing ordermay include, but are not limited to: the maximum effective interest rateand fees the borrower agrees to pay, the borrower's desired period ofthe loan, etc., as discussed hereinabove.

The borrower may also provide supporting information including availablecollaterals, insurance, and other information that may be usable forassisting the process of rating the risk of lending to the borrower,etc.

Method 3000 further includes receiving 320 a lending order from alender. A lending order defines general loan lending terms proposed by acertain lender for the funding. The loan lending terms are not specificwith respect to a certain borrower, but rather define general loan termsthe lender wishes to lend under. However, the terms may includeconditions related to certain characteristics pertaining to borrowers,such as type of business or industry they are active in, geographicregion, etc.

The loan lending terms may include, but are not limited to: the amountto be lent, the target risk the lender agrees to assume, the type ofalgorithm used by the lender to calculate his risk and the specificparameters used in such algorithm, (including the type and amount ofcollaterals), the desired period(s) (or alternative periods), theminimum interest rates, and any other term associated with eachacceptable set of parameters, etc.

Finally, there is automatically provided 330 a match to a currentlending order from amongst the borrowing orders, such that the matchedorders are mutually satisfied with respect to the loan terms, say usinga matcher 130, as described in greater detail hereinabove.

In the provided match, the lending order is matched with a set ofborrowing orders. The loan funded by the lender who issued the lendingorder is spread among multiple borrowers.

Thus from the perspective of the lender, the lender holds a portfolioloan, satisfying his lending order, as discussed in greater detailherein below. Each of the loans in the portfolio loan is an atomic loan.An atomic loan represents a direct contractual agreement between onelender and one borrower.

That is to say, from the perspective of the borrower, the borrowerreceives a composite loan satisfying the borrowing terms as specified inhis borrowing order. The composite loan comprises atomic loans. Eachatomic loan represents a direct contractual agreement between one lenderand one borrower, as described in further detail herein below.

Optionally, the method may also include receiving one or more subsidizerorder(s) from subsidizer(s), such as a government agency, or acommercial organization. In the subsidizer order, the subsidizer maydefine the loan terms for loans he wishes to subsidize. The loan termsmay include but are not limited to: a profile of borrowers (students,low income earners, etc.), the level of subsidizing (as a part of theinterest rate, as a part of the loaned sum of money, etc.), other loanterms, etc.

In the matching process, the borrowing order may be matched withsubsidizer order(s) in addition to lending order(s), as described hereinabove.

Optionally, the method 3000 further includes a step of executing theloans satisfying the lending order.

The execution of the loans may include generating legal documents foratomic loans, issuing instructions for transferring money to a borroweraccording a composite loan, issuing instructions for transferring moneyfrom a lender according to a portfolio loan, etc.

Preferably, the instructions for transferring money between users(lenders, borrowers, etc.) are forwarded to an escrow agent fortransferring the money, as described in greater detail herein below.That is to say, the method 3000 may be implemented by an entity whichdoes not hold the funds transferred among lenders borrowers serviceproviders and other parties.

Reference is now made to FIG. 4, which is a flowchart illustrating amethod for handling user interactions, according to a preferredembodiment of the present invention.

Preferably, a method according to a preferred embodiment of the presentinvention may further include handling user interactions with theapparatus 1000.

The identity of the user is verified. If the user is a new user 410, theuser is directed to a user registration process 420.

The user is presented a menu of functions, to select the function theuser wishes to access. Once the user selects the function, there may becarried out another level of access control, for example—in case ofsensitive functions 430. For example, if the user is a guest user 415,he may be presented an appropriately customized menu 440, containingonly those functions accessible to guests.

Preferably, the ID and password of the user are checked. Based on apredefined profile assigned to the user, the user is prompted toadditional forms of authentication such as physical token or a user key,as known in the art, where required. Access to certain functions mayrequire additional measures of authentication, as described hereinabove.

Preferably, the method for handling user interactions implementsexternal conditions verification, as illustrated in FIG. 4 a.

Reference is now made to FIG. 5, which is a flowchart a method forillustrating user management, according to a preferred embodiment of thepresent invention.

A method according to a preferred embodiment handles all the managementfunctions that involve users of all types including, but not limited to:lenders, borrowers, service providers, occasional authorized users, etc.The user management functions include but are not limited to: userregistration 510, fees and subscription handling, definition of accessprofiles and authorizations, collecting of other information related tothe user, etc.

All updates to user data are subject to a user information assessment560, which checks impact of the changes on the user's status, rating(specifically—risk rating), loans in process, as well as any other knowninformation.

Specific attention is given to rating, carried out by a user's ratingassessment process 560. Any change in user data is checked for itspossible effect on the user's rating, which indicates the risk involvedin lending to the user, such as introduction of new collaterals, changeof address to a neighborhood that is considered risky, etc. asillustrated in FIG. 5 a.

The user may be ranked according to information provided by one or morerating service(s), such as Dan & Bradstreet™, etc.

Optionally, the user information assessment 560 is followed by externalverification 520. In the external verification, external verificationservice providers, such as a loan agent or a rating service, provideadditional information which bear relevance to the user when borrowingor lending a loan.

A change in a user's rating may affect outstanding loans (i.e. lent,currently in re-payment) as well as pending loans (i.e., requested, notyet matched), as described in further detail hereinabove. Based on theuser information assessment 560, automatic events may be generated, sayby the apparatus 1000, described hereinabove.

According to a preferred embodiment, the method for user management alsoincludes a process for managing user collaterals as illustrated in FIG.5 b.

For example, collaterals available to a user may be a part of theinformation stored 540 for the user. The available collateralsinformation is used for allocating collaterals to loans. The collateralsmay be associated to a borrowing order (570) or to a composite loan(580).

Preferably, each new user and visiting user to the apparatus 1000undergoes a registration process. Each user is granted a user name, auser type, credentials, one or more forms of authentication (from asingle password, through a multi-stage authentication that may include ahardware device with built-in credentials, etc.).

The registration process may require presenting specific documents to atrusted user that authenticates the documents and reports the successfulauthentication to the apparatus 1000 (e.g., a certificate of goodstanding).

Preferably, the registration is a multi stage process, in which theapparatus 1000 accumulates information about the registering user,records the information in a database, provides the registering userwith selective access to the database, allows other (specific) users toprovide or be provided with information about the user, and monitors theregistration until it is successfully completed, or abandoned.

Optionally, the registration process includes a rating process. Therating process is invoked to initiate a request for an external ratingservice. The rating service may be selected according to geography,industry, etc. The information may be provided by the external ratingservice provider in a batch mode, in an on-line mode, or both.

In some cases, the system may provide a conditional or a provisionalregistration for either lenders or borrowers.

For example, the user may be allowed to start using the system butblocked from completing a transaction until required conditions are met.The user may apply for a loan and participate in the borrowing processbut not receive the money until authenticating himself to a userproviding a user authentication service.

In one exemplary provisional registration, a user is allowed to startlending or borrowing a loan. However, a transaction for ordering themoney transfer to the user's account, or from the user account is notcompleted before the user physically signs an umbrella contract in frontof a certain user who is a signature guarantor. The signature guarantorchecks the signed contract and reports the signing to the apparatus1000.

Preferably, a method according to a preferred embodiment may include aservice provider registration process resembling the user registrationdescribed hereinabove.

The service provider registration process may be carried out in multiplestages. The service provider registration process includes, but is notlimited to: checking the user's fulfillment of predefined requirements,verification and authentication of certification data, professionalexams, etc.

The service provider registration process renders the applicant legallyor professionally capable of providing his services.

The service provider is allowed to update only those data elements he isauthorized to modify. Preferably, following the update, the apparatus1000 performs a service provider (SP) information assessment process.

In the SP information assessment process the update is checked withrespect to potential impacts on authorization or certification.Optionally, there are generated certain events to handle situationswhere such potential impacts exist. For example, there may beautomatically generated predefined notification to certain authorizedusers upon the detection of the existence of the potential impacts. Thenotification may be general or specific to certain loans the serviceprovider is involved in, say as a borrower rating provider.

Reference is now made to FIG. 6 a, which is a flowchart illustrating amethod for borrowing order receiving and management, according to apreferred embodiment of the present invention.

According to a preferred embodiment, borrowing order receiving andmanagement starts from the interaction of a borrower with the apparatus1000. The borrower enters specifications for desired loan borrowingterms, in a borrowing order, as described in further detail hereinabove.

Optionally, borrowing orders may also be entered in a batch process,where the data of the loan is provided from an external system.

Optionally, the borrowing terms are based on a previously storedborrowing profile 221, and may be modified for a specific order.

Optionally, the user may provide collateral for the loan, in which case,a collateral update process is invoked for updating 541 the databasewith the collaterals.

The borrowing order (BO) is characterized by a set of parameters,including but not limited to: a borrower's identity (ID)—a uniqueidentifier of the borrower, through which his relevant characteristics(e.g., contact details, account number, tax payer ID., rating, etc.) maybe obtained, price—the maximum effective or absolute price (i.e.,interest rate) which the borrower wishes to borrow at, amount—themaximal or/and minimal sums of money that the borrower wishes to borrow(by specifying both the borrower indicates his willingness to getpartial fulfillment), the currency of the loan, the period for which theloan is requested (start date and end date), and repayment—repaymentterms that the borrower wants (for example, the borrower may request torepay in one lump sum at the end of the period, or make a series ofperiodical payments).

The borrowing order (BO) may also be categorized by other parameters:Prepayment Options—whether preliminary payment is allowed, when isprepayment allowed, prepayment penalty, etc, collaterals data—details ofcollaterals offered by the borrower, insurance—whether or not theborrower wishes to buy insurance for the loan to improve the rating,amount, conditions, etc, the purpose of the loan—say a student's loanwhich may be subsidized, as described hereinabove, subsidy reference—ifthe requested loan is tied to an open subsidizing order, signature—anelectronic signature that is considered binding, (though may not sufficefor specific loans, such a loan exceeding a predefined amount, or incertain jurisdictions), whether the borrower allows the loan to beposted in a secondary loan market

As part of the borrowing order (BO) entry, a relevant subsidy request(as specified by the borrower) is checked. Eligibility or relevance isverified, either electronically or through a lending agent.

There is also handled a priority among the predefined various orderprofiles, stored in a loan profile directory, as follows: user definedprofiles, group defined (based on user's characteristics), andlastly—general profiles. The user selects the one appropriate for thecurrent loan order, or—he—may prefer to start from scratch, in whichcase he can still save the new loan profile for future use. A separateprocess may be used for handling updates to the loan profile directly.

According to a preferred embodiment, subsidizers are allowed to posttheir unique offering in a subsidizer order, say utilizing a subsidizerorder receiver, as described hereinabove.

The subsidizer order describes loan subsidizing terms, including but notlimited to: the method of subsidy offered, a method of verifying theborrower's entitlement for the subsidy offered, a period in which theoffer is available, a set of specific conditions (say, the size of theloan, jurisdiction, personal history, type of transaction, any specificrequirement of the lender), a method of calculating the amount orpercent of subsidy, the method of paying for the subsidy, a total amountof cash covered by the specific subsidy offer, etc.

Optionally, based on the profile or the amount involved in thesubsidizer order, certain subsidizer orders may be routed to aparticular agent. The agent checks the details of the offer and has thesubsidizer sign an appropriate subsidy schedule to be added to asubsidizer's agreement, before the subsidy order is released and becomesactive.

Reference is now made to FIG. 6 b, which is a flowchart illustrating amethod for signature verification, according to a preferred embodimentof the present invention.

A method according to a preferred embodiment further handles signatureentry for borrowing orders, lending orders, or any other transaction.Various types of signatures may be entered, such as Notary authorizedsignatures, Electronic Signatures, Biometric signatures, Naturalsignatures, etc, as known in the art.

In a signature verification method, in accordance with a preferredembodiment of the present invention, if the apparatus 1000 or a specificlender 602 requires a manual signature, the signature may be verified603 by a third party.

A demand event for verification of a signature is generated 604. Next,there is determined a designated lending agent (by region, industry,etc.) 605, and the lending agent is notified about the event 606.

Reference is now made to FIG. 7, which is a flowchart illustrating amethod for lending order receiving and management, according to apreferred embodiment of the present invention.

A system administrator or an authorized system user defines the generaland the group type profiles. The lending terms may be stored in alending loan profile for a specific lender. The lending terms aredefault lending terms, presented 24 to the specific lender, whenever thelender places a lending order, as default terms for the lending order

A lending order may include, but is not limited to the following: anidentifier of the lender, a price—a minimum effective or absoluteinterest rate the lender agrees to lend at, maximal and minimal (range)sums of money that the lender wishes to lend, currency, minimal andmaximal time period for the lender's proposal, and repayment mode andterms that the lender requests (linear, zero coupon, balloon payment,minimum increment amount to receive, etc).

The lending order may further include special conditions, such as:whether the lender prefers to lend over a period of time or in onepayment, maximum number of loans cut from the entire amount offered,states/regions of the borrowers, whether or not insurance is requiredfor the loan and details relating to the insurance, whether prepaymentis allowed and under what conditions or penalties, etc.

The lending order may also include signature requirements definingspecifics of requirement for a manual signature verification, tied to aformulated condition (e.g., amount), or non-conditional.

The lending order received from the lender is recorded in a database.Upon providing a matching to lending order, as described in furtherdetail hereinabove, the lending order is marked as fulfilled.Preferably, data pertaining to the lending order may be used forhistorical statistical analysis, archived, etc.

Preferably, when a lender enters a lending order, the lender ispresented with default lending terms from a pre-stored profile. Thepresented terms are fetched according to a priority starting with lenderspecific lending terms stored in a lender specific loan profile.

When there is no loan profile specific to the lender, or the lenderspecific loan profile fails to provide a default value to certain loanterm (say, the range of interest rates), the apparatus 1000 may searchfor a loan profile defined for a group of lenders that the lender belongto. Finally, the default value may be fetched from a general loanprofile.

When the lender is presented the default lending terms according toexisting loan profiles, he may choose to override certain terms with newvalues for the specific lending order. The lender may also be allowed toupdate or define lender specific lending terms, in a lender specificloan profile, as described hereinabove.

Reference is now made to FIG. 8 which is a flowchart illustrating amethod for managing a secondary loan sale, according to a preferredembodiment of the present invention.

A method according to a preferred embodiment includes a process allowinga lender to act as a seller offering a selection of his active loans forsale. The process described herein below, may be carried out by asecondary sale manager, as described hereinabove.

The lender may specify 810 criteria for selection of active loans fromhis active loans, that he is interested in putting his position at forsale. The lender is presented 820 a list of loans from his loanportfolio. Each loan in the presented list meets the criteria.

Then, the lender may choose 830 from the list one or more specificloan(s) he wishes to put for sale. If one of the loans put for sale bythe lender is not assignable 840, say as a result of certain conditionsimposed by a subsidizer of the specific loan which is put for sale, arejection is issued 850 and reported to the lender.

Next, the lender may specify 860 various sale terms, to be recorded in asale order for the loan. The sale terms may include but are not limitedto: the price, the transaction type, the percentage of the positionbeing offered for sale, or any other conditions.

Finally, the terms defined by the lender are saved in the secondary saleorder, and a second lender may decide to buy the position, using thesecondary sale manager, as described in further detail hereinabove. Theresale may be done in the Matching: the offered loan for resale ishandled as a borrowing order, and any lender's order (LO) may be matchedwith it (unless the “buying” lender specified his wish not to buy a soldloan.)

The second lender may issue a buying order defining his terms for buyinga position in an existing loan.

Alternatively, a buying order is rather automatically derived from alending order of the second lender, by the secondary sale manager.Optionally there may be provided that the second lender agrees that hislending order be fulfilled in a secondary market, say as an indicationin a user profile stored for the second lender.

A Method for Providing a Match

The matcher 130 matches each lending order with multiple borrowingorders and visa versa, distributing the risk.

As described herein bellow, the matching process results in compositeloans made of a sets of atomic loans from multiple lenders to a singleborrower; and corresponding portfolio loans made of sets of atomic loansfrom a single lender to multiple borrowers.

Reference is now made to FIG. 9 a which is a block diagram illustratingan exemplary composite loan and portfolio loan, according to a preferredembodiment of the present invention.

The effective characteristics (interest rates, amounts, time, repaymentschedules, risk profile, etc.) of the composite loan are derived fromthe characteristics of each of the atomic loans. The interest rate ofthe composite loan is the weighted average of the interest rates of theunderlying atomic loans multiplied by each atomic loan's percentage.

For example, if the composite loan of $1000 is a combination of a $600loan at 3% interest and an additional $400 at 4% interest, then thecomposite loan of $1000 bears (3%*600+4%*400)/1000=3.4% interest rate.

The amount of the composite loan 910 is the sum of the amounts of allthe atomic loans 901 of which it is composed. The time period of acomposite loan is the union of the time periods of the atomic loans 901of which it is composed. The repayment schedule of a composite loan is aunion of the repayment schedules of the underlying atomic loans 901.

A composite loan 910 can be made of atomic loans 901 with differentre-payment schedules and different methods and priorities in allocatingspecific payments among the underlying atomic loans.

Once we have generated a set of composite loans 910 to satisfy a set ofborrowing orders and lending orders, we can look at all of the atomicloans 902 associated with a single lending order as a portfolio loan 920

The risk associated with this portfolio loan 920 may be calculated fromthe respective risks (ratings) of each of the borrowers associated withthe portfolio loan 920 and the correlations between them.

In essence, a portfolio loan can be looked upon as a virtual investmentportfolio. The risk of the portfolio loan 920 can be calculatedusing—for instance—the risk calculations of Modern Portfolio Theory(MPT). Therefore, if we have two atomic loans 902 given by a lender L toborrowers B1 and B2, the risk associated with the portfolio loan 920 iscalculated in one possible implementation as follows:

R ₁₂=√{square root over (w ₁ ² R ₂ ² +w ₂ ² R ₂ ²+2w ₁ w ₂ R ₁ R ₂ρ₁₂)}

Where w₁, w₂ represent the weights associated with each of the twoloans, respectively, and w₁+w₂=1, and ρ₁₂ is the correlation coefficientbetween the two borrowers. The formula for the risk of a portfolio loanR_(P) composed of more than two borrowers can be generalized using theMPT principles:

$R_{P} = \sqrt{{\sum\limits_{i}\; {w_{i}^{2}R_{i}^{2}}} + {\sum\limits_{i}\; {\sum\limits_{j}\; {w_{i}w_{j}R_{i}^{2}R_{j}^{2}\rho_{ij}^{2}}}}}$

Where:

i ≠ j; ${\sum\limits_{i}\; w_{i}} = 1$

And ρ_(ij) is the correlation coefficient between borrower i and j.

The correlation coefficient represents the direction and strength of therelationship between two borrowers, and takes on a value between −1 and+1. The sign of the correlation coefficient indicates the direction ofthe relationship: a positive sign indicates that there is a positiverelationship between the borrowers, while a negative sign indicates thatthere is a negative relationship between the borrowers.

The strength of the relationship is indicated by the absolute value ofthe correlation coefficient: the closer the number is to 1 the strongerthe relationship, while the closer the number is to 0 the weaker therelationship. A generalization of the idea of the correlationcoefficient may be as follows:

ρ=1—means that there is an exact positive relationship between the twoborrowers, i.e. if one defaults on the loan repayment so does the otherand vice versa.

ρ=0—means that there is no relationship between the two borrowers.

-   -   ρ=−1—means that there is an exact negative relationship between        the two borrowers, i.e. if one borrower repays the loan the        other is sure to default and vice versa.

The correlation coefficient between two borrowers plays a major role indetermining the effectiveness of diversifying the risk of a portfolioloan.

To determine the correlation between two atomic loans, one can usequantitative methods based on the loan histories of the borrowers. Ifthe loan histories are unavailable, one can use methods that try toquantify the qualitative relationship of the borrowers. For example, arethey relatives, do they work for the same employer, do they live in thesame geography, etc.

Borrowers and lenders have different goals. Borrowers typically wish toborrow money at the lowest possible interest rate, while lenders wish tolend money for the highest return at a specified risk level.

According to a preferred embodiment of the present invention, the matchprovided by the matcher 130 is optimized with respect to one or morecriteria. The criterion(s) may be defined by an operator of theapparatus 1000.

Preferably, the matcher 130 has to carry out a method including aconstrained optimization process aimed at satisfying a set of criteriadefined by the operator of the apparatus as the utility function, asdescribed in further detail herein below.

The optimization process involves finding a match amongst each lendingorder and respective borrowing orders, such that the found matches yieldthe best result as indicated by the criteria defined by the operator.The found matches further satisfy constraints as defined by borrowersand lenders under the loan terms (i.e., level of risk, time period,etc), as defined in their respective borrower requests and loan orders.

Theoretically, at each point in time, the matching process generates foreach outstanding borrowing order BO, the set of all possible compositeloans CL_(j) (BO_(i)) combinations that can satisfy the borrower's loanterms.

After doing so for all outstanding borrowing orders, the intermediateresult is a set of all of the possible composite loan combinationsCL_(ij) that can satisfy all of the outstanding borrowing orders.

The next step in the matching process is the selection of a subsetCL_(ij) of the composite loans that optimizes the Matching UtilityFunction, defined herein below such that for each borrowing order BO_(i)at most, one composite loan is selected, and that the subset ofcomposite loans can co-exist.

The set of all possible composite loans that satisfy a single borrowingorder can be infinite. For example, if the borrower requests a loan of$1000, the set may theoretically be composed of an infinite number oflender/amount combinations.

To reduce the complexity of the matching process, the apparatus 1000 maydefine a limited number of values for each of the borrowing/lendingorder dimensions. For example, the period possibilities can include:3-months, 6-months, 1-year, 2-years, . . . 10 years. Likewise the rating(risk) scale can be divided into {very high, high, medium, low, verylow}. The finite set of loan specifications, greatly reduces the numberof composite loans that match a single borrowing order.

Preferably, a user of the apparatus 1000 may be allowed to configure theMatching Utility Function within matcher 130, to be optimized throughthe constrained optimization process. The user may define the MatchingUtility Function and the parameters the function uses.

The utility function expresses the goal of the matching process. Ahigher utility function score expresses a better match, and is thuspreferable.

Borrowers desire to borrow money at the lowest cost (interest rate,commissions) available that complies with their other requirements(amount, time, repayment schedule) as defined in their borrowingorder(s).

Lenders, on the other hand, want to lend money for the highest return ata specified maximum level of risk that complies with their otherrequirements (amount, time, repayment schedule) as defined in theirlending order(s).

The operator of the apparatus 1000 wishes to generate the highest volumeof loans, to maximize his profit from transaction fees, and to maintaina maximum level of customer satisfaction. For example, if only one oftwo identical borrowing orders can be satisfied, typically the one thatis outstanding the longest is selected, all else being equal, so as toshorten the averaged waiting time for borrowers.

The utility function is a user configurable function of the totalvolume, return, risk and customer satisfaction index of the set ofcomposite loans that satisfies a match. Optionally, the utility functionis such that: The higher the volume of loans generated—the higher theutility score, the lower the interest paid by borrowers—the higher theutility score, the higher the return generated for lenders—the higherthe utility score, the higher the risk level—the lower the utilityscore, the higher the customer satisfaction index—the higher the utilityscore.

The goals of borrowers and lenders are of opposite nature, i.e.,borrowers want to borrow at the lowest cost, whereas lenders want tolend at the highest rate for the specified risk level.

For example, let us assume lender L wants to lend money with interest ofat least 4%, and borrower B wants to borrow money at a cost (interestrate) of at most 6%. Assuming all other parameters support a match, theloan between B and L could be executed with interest anywhere in therange of 4% to 6%.

The nature of the Matching Utility Function determines the exact valueof the loan. A fair utility function may minimize the difference of theactual loan from the desired (minimum/maximum) levels of interest soughtafter by the lender and borrower, as defined by their respective orders.

Preferably, an operator of the apparatus 1000 may be allowed toconfigure the matcher 130 with the Matching Utility Function, asdescribed hereinabove. For example, the operator may configure thematcher 130 with a Matching Utility Function having the general scheme:

$U = {{w_{1}{Volume}} + {w_{2}\frac{Return}{Risk}} + {w_{3}C\; S\; {I.}}}$

In the exemplary utility function, w₁, w₂, and w₃ denote the relativeweight assigned by the operator to the volume of orders, the return/riskration, and the customer satisfaction index (CSI), respectively.

The customer satisfaction index (CSI) quantifies the service level thatthe transacting parties (borrowers and lenders) experience. The CSItakes into account the amount of time an order is outstanding, previousorders that are not fulfilled (and their distance from market rates),and so forth.

The matching process may be implemented utilizing different types ofalgorithms with varying degrees of complexity. Ideally, one may want toselect an algorithm that generates the optimal match in the shortesttime. However, the multi-dimensional matching problem at hand is complexin nature. Therefore, in reality, the algorithms used may be sub-optimalon the one hand, but fast enough on the other.

Optionally, the matching problem at hand is formulated as follows.

Let {BO₁, . . . , BO_(N)} denote pending borrowing orders, and {LO₁, . .. , LO_(M)} denote pending lending orders.

Each borrowing order (BO) represents a tuple BO_(i)=BO_(i)(α,p, ν), andeach lending order LO represents a tuple LO_(i)=LO_(i)(α,r, ν), where:

BO_(i)(α)—represents the amount of the borrowing order, typically arange [α_(min),α_(max)] indicating the minimum and maximum amounts;BO_(i)(p)—represents the price (interest rate) of a borrowing order;BO_(i)(r) represents the risk of the borrowing order;BO_(i)( ν) represents the remaining terms of the borrowing order;LO_(i)(α) represents the amount of the lending order, typically a range[α_(min),α_(max)] indicating the minimum and maximum amounts;LO_(i)(p)—represents the price (interest rate) of the lending order;LO_(i)(r)—represents the risk allowed by the lending order; andLO_(i)( ν)—represents remaining terms of the lending order.

To facilitate the matching process, a matrix CL_(ij) is used. The matrixhas N rows and M columns, where each cell is a tuple CL_(ij)=(m,α) where

${{CL}_{ij}(m)} = \left\{ \begin{matrix}{1\mspace{14mu} {if}\mspace{14mu} {BO}_{i}\mspace{11mu} {matches}\mspace{14mu} {LO}_{j}} \\{0\mspace{14mu} {if}\mspace{14mu} {BO}_{i}\mspace{11mu} {does}\mspace{14mu} {not}\mspace{14mu} {match}\mspace{14mu} {LO}_{j}}\end{matrix} \right.$

and CL_(ij)(α) designates the amount allocated from a lending orderLO_(j) to a borrowing order BO_(i).

At each moment of time, during the optimization process, the first phaseof the matching process is to traverse the matrix and initialize eachcell CL_(ij)(m) to bit values (0/1). Each bit value indicates whetherthere is a potential match between borrowing terms defined by borrowingorder BO_(i) and lending order LO_(j).

Preferably, rather than recalculating each cell (bit value) in thematrix in each cycle of the optimization process, the cellscorresponding to matched orders are removed and cells corresponding tonew borrower and lending orders are added to the matrix.

That is to say, the matching process becomes a continuous multi cyclicoptimization process where matched orders are removed from the matrixand new orders are added to the matrix through each cycle, as describedhereinabove. In each cycle, there is found an optimized match betweenpending borrowing orders and lending orders. However, some of the ordersmay be left unmatched, and passed on to the next cycle.

Optionally, the matching algorithm may maximize

${\sum\limits_{j}\; \frac{{Return}\left( {{LO}_{j}(a)} \right)}{{Risk}\left( {{LO}_{j}(a)} \right)}},$

such that:

∀j α _(min) ≦LO _(j)(α)≦α_(max)

∀i α _(min) ≦BO _(i)(α)≦α_(max)

∀j Risk(LO _(j)(α))≦LO _(j)(r)

Where:

${{Return}\left( {{LO}_{j}(a)} \right)} = {\sum\limits_{i}\; {{{CL}_{ij}(m)} \times {{CL}_{ij}(a)}}}$${{Risk}\left( {{LO}_{j}(a)} \right)} = \sqrt{\begin{matrix}{{\sum\limits_{i}\; {{CL}_{ij}^{2}(a){{BO}_{i}^{2}(r)}{CL}_{ij}(m)}} +} \\{\sum\limits_{i}\; {\sum\limits_{k}\; {{{CL}_{ij}(a)}{{CL}_{kj}(a)}{r_{ik}(j)}{{CL}_{ij}(m)}{{CL}_{kj}(m)}}}}\end{matrix}}$

r_(ik)(j)=BO_(i)(r)BO_(j)(r)ρ_(ik) (where ρ_(ik) denotes the correlationbetween borrowing orders BO_(i) and BO_(k).

That is to say, the matching problem is therefore a constrainedoptimization problem that can now be solved using various optimizationtechniques (e.g.: quadratic programming, simulated annealing, etc).

In theory the multi-dimensional cube that the matching algorithm has tosearch through to find the optimal match can be extremely large, alongmultiple dimensions and allowing an infinite range of continuous valuesfor each attribute.

To simplify the matching process and reduce the complexity, we can limitsome of the attribute values to a small finite set of discrete values,constituting discrete ranges of values, each range used for one of theattributes. For example, the risk values can be confined to a finite setof five values {very high—VH, high—H, medium—M, low—L, very low—VL}, theperiod values can be confined to {1 month, 3 months, 12 months, X years}and so forth.

Furthermore, in practice, the price (interest rate) of a loan offerreflects the amount of risk the lender wishes to take. Typically, thehigher is the accepted risk, the higher the price (rate) becomes. Tofurther simplify the matching process the pending offers are dividedinto a few different markets that reflect the prices (rates) requested.By reducing the set of possible values, the matching algorithm islimited to searching for matches in the same market {BO_(i)}s.

By relaxing attempts to find an optimal solution and rather looking fora feasible solution that can be computed quickly enough, a possibleimplementation may be reached, say using the following “Greedy”algorithm.

The “Greedy” algorithm attempts to allocate each borrowing order evenlybetween X lenders.

The algorithm is described herein below, using the above notation.

Row CL_(0j) and column CL_(i0) are added to the matrix, such that thematrix holds in the added row and column the temporary amounts allocatedfrom the corresponding borrowing and lending orders.

The algorithm includes the following steps:

-   -   Sort borrowing orders {BO_(i)} according to risk;    -   Sort lending orders {LO_(j)} according to price (interest rate);    -   For all i,j initialize CL_(ij)(m) to the corresponding bit (0/1)        values;    -   For i=1, . . . N do;        -   For j=0, . . . , M do;            -   CL_(ij)(α)=0;    -   For j=1, . . . , M do;        -   CL_(0j)(α)=0;    -   For i=1, . . . , N do;        -   For j=1, . . . , M do;        -   If (CL_(ij)(m)=1 AND CL_(0j)(α)<LO_(j)(α) AND            CL_(i0)(α)<BO_(i)(α))            -   then do:            -   CL_(ij)(α)=CL_(ij)(α)+BO_(i)/X            -   CL_(i0)(α)=CL_(i0)(α)+BO_(i)/X            -   CL_(0j)(α)=CL_(0j)(α)+BO_(i)/X    -   For j=1, . . . , M do;        -   If Risk(LO_(j)(α))>LO_(j)(r) then            -   For i=1, . . . N do;                -   CL_(i0)(α)=CL_(i0)(α)−CL_(ij)(α);                -   CL_(ij)(α)=0;        -   For i=1, . . . N do;            -   If CL_(i0)(α)<BO_(i)(α) then                -   For j=1, . . . , M do;                -    CL_(0j)(α)=CL_(0j)(α)−CL_(ij)(α);                -    CL_(ij)(α)=0;

Following the full run of the algorithm, the remaining allocationsCL_(ij)(α) in the matrix can be used to generate loans that satisfy thematching constraints. After the loans are generated, their correspondingdata is removed from the matrix and the algorithm is re-started again.

The algorithm ensures that borrowing orders are satisfied according totheir risk level (borrowers with less risk satisfied first), that aborrower gets the cheapest loan available (subject to the Compositeloans being distributed between 1/X lenders), and that a reasonablelevel of risk management is achieved.

Preferably, Subsidizer Orders are also handled by the matching processaccording to their limitations and considerations, as describedhereinabove.

A method according to a preferred embodiment of the present inventionallows the participation of service providers as described in furtherdetail, including but not limited to the service providers describedherein below.

Reference is now made to FIG. 9 b, which is a flowchart illustrating amethod for contract management of a composite loan, according to apreferred embodiment of the present invention.

The method of FIG. 9 b utilizes a matrix resultant upon the matchingmethod described hereinabove. In the matrix, each row represents onecomposite loan from multiple lenders to one borrower. The composite loanincludes a group of atomic loans. The atomic loans are parsed andprocessed into atomic contracts. Each atomic contract contains the basicdata pertaining to the atomic loan, such as—lender details, borrowerdetails, amount, rate, period, conditions and payment terms.

For each composite loan, there is carried out a process of borrowerrating 910, say using an external borrower rating service. If the ratingof the borrower is not sufficient, the composite loan is rolled back912, a log is updated with the roll back data 914 and the fundsallocated to the loans (in lending orders) are released for furtherprocessing by the matching process described hereinabove.

Next, there is carried out a signature validation process 105, asillustrated hereinabove.

Next, each of the atomic loans in the composite loan is parsed 920, aloan contract is generated 930 for the atomic loan, and data pertainingto the loan contract is recorded 940.

Preferably, each loan contract is checked with respect to internalconditions. If the loan contract fails to meet the internal conditions,the loan contract is marked as unacceptable 950.

Preferably, each loan contract is also checked with respect to externalconditions. Optionally, the loan contract may be marked as pending,until an external verification of conditioned is carried out 962.

For each loan there are further carried out collateral managementprocesses 970, found transfer instruction processing 980 (say usingescrow agents), and accumulation 990 of funds to be provided by thelender, as described in further detail hereinabove.

Preferably, there is managed a contract based on the composite loan,such that the atomic loans in the composite loan do not have to beexposed to the lender, as illustrated in FIG. 9 b.

Once the matching process generates composite loans and thecorresponding portfolio loans, a set of atomic loans is establishedbetween borrowers and lenders.

The apparatus 1000 instructs service providers to perform functions suchas: reviewing financial info, verify and accept collaterals, reviewloans document with the borrower and obtain notarize signatures etc.

Once all conditions are met, the apparatus 1000 issues electronic fundstransfer instructions to the escrow agents, to collect money from thelender's account and transfer funds to the borrower's account.

In most cases, a borrower gets one (or very few) transfers for theentire composite loan. Similarly, lenders see one or very few transfersfor the entire amount of a portfolio loan. In most cases all funds aretransferred to and from the account of an escrow agent, according totransfer.

Escrow Services

Escrow Services are provided by independent service providers who holdin trust funds that are flowing among lenders, borrowers and otherservice providers.

Reference is now made to FIG. 10 which is a block diagram illustratinginteractions between escrow service providers and other parties in aloan market, according to a preferred embodiment of the presentinvention.

According to a preferred embodiment, escrow agents 101 interact withlenders 102 and borrowers 103, say for executing the transferring offunds between lenders and borrowers, etc, as described in further detailherein below.

The escrow agents 101 also interact with subsidizers 104 who transfertheir share in principal or in interest of a subsidized loan handled bythe escrow agents 101, sellers 105 who sell their positions in activeloans, and third parties 106 having stakes in the loan process.

The escrow agents 101 receives instructions from the loan market 107,providing their services, for supporting various processes carried outin the loan market 107, and reports back to the loan market 107 aboutall funds received or paid for managed loans and related services.

Multiple escrow agents may participate in the borrowing and lendingtransactions, providing services to both borrowers and lenders, as wellas to the service providers, and to the operator(s) of the apparatus1000.

An escrow agent collects the funds, holds them in trust and transfersthem, when due, to the receiving entities. Funds held by the escrowagent accumulate interest that is credited to the appropriate party.Every transaction performed by the escrow service may have a feeassociated with it.

Preferably, there is defined a communication protocol between theapparatus 1000, and each escrow agent. The protocol may be used for:opening sub-accounts for new lenders, borrowers and service providers,providing advice about money expected to be received from lenders,providing advice about money expected to be received from borrowers,issuing instructions to transfer money to borrowers (say, either partialor complete loan amount), issuing instructions to transfer money tolenders (as money is collected from borrowers), issuing instructions totransfer money to service providers, etc.

Preferably, the protocol is also used for delivering reports from theescrow agent to the apparatus 1000. The reports may include, but are notlimited to: money collected from lenders reports, moneys collected fromborrowers reports, failing money transfer reports, computed and assessedfees reports, interest calculated periodically for each sub-account,etc.

The escrow agent may collect and dispense funds through any currentlyknown method or service, including but not limited to: AutomatedClearing House (ACH), wire services, charging a credit card, usingperson-to-person payment services such as PayPal, etc. The Escrow Agentcan accept funds that were transferred by the payer or draw directlyfrom the payer account using Automated Clearing House (ACH), or anyother similar service(s).

Reference is now made to FIG. 10 a, which is a flowchart illustrating arepayment management method, according to a preferred embodiment of thepresent invention.

According to a preferred embodiment of the present invention, there isprovided a method for managing repayment of loans. The method includesmonitoring the due payments according to a schedule of payments. Theschedule of payments is derived from the composite loans resultant ofthe matching process, as described in further detail hereinabove.

First, an authorized user of the apparatus 1000 provides a date rangefor target payments 1010. Each active composite loan 1020 is examined1030 with respect to having payments due within the date range.

If there is used an automatic withdrawal method 1040, there aregenerated a transaction for automatic electronic collection 1050 and awithdrawal advise to the borrower 1055.

If there isn't used automatic withdrawal, there are issued instructions1060 to an escrow agent to expect fund transfer to be initiated by theborrower, and a statement is issued 1065 to the borrower.

If there are unpaid payments that are past their due payment date 1035,there is triggered a collection process, say by a collection manager1056.

Reference is now made to FIG. 11, which is a flowchart illustrating arepayment management method based on notices from escrow agents orbanks, according to a preferred embodiment of the present invention.

When there is input a notice of payment from a bank or from an escrowagent 1110, there is retrieved 1020 the data of the composite loan (CL)that the input notice of payment relates to. If the payment is late orinsufficient 1130, a collection manager 1140 is triggered to initiate acollection process, for collecting the debt.

If not all conditions are met 1150, a notice is issued 1155 to theescrow agent, to verify conditions. Further, a statement is issued 1158to the borrower which refers to the outstanding conditions.

Next, there are calculated fees and interest rates 1160, there isallocated a payment 1170 to the lender.

Next, relevant collaterals, used for the composite loan, are released1180.

If the composite loan is fully paid 1190, the composite loan is closed1195, as illustrated in FIG. 11 a.

Optionally, there is used a method for instructing the escrow agent(s)to carry out fund dispensing to the borrower(s), as illustrated in theflowchart presented in FIG. 11 b.

Rating Services

Rating services are provided by independent, authorized rating serviceproviders.

A rating service provider is a third party offering borrower rating on afee basis. Typically, the acceptance of the rating service provider asan authority is derived from its reputation. The rating serviceprovider's credibility relies heavily on the thoroughness of itsevaluation and verification of the subject entity it rates.

A method according to a preferred embodiment may further support theparticipation of other service providers in the loan trading business,including but not limited to: legal service providers, insuranceservices, external information providers, loan monitoring serviceproviders (say, for monitoring the financial status of the borrower),etc.

Advantages of the Present Embodiments

The present embodiments may introduce advantages over current solutions.The advantages may include, but are not limited to the possibleadvantages described in the following paragraphs.

The system allows for a flexible loan market.

The system provides for such a flexible loan market that is open toborrowers and lenders large and small.

The flexibility of the loan market allows each user, whether acting as aborrower or a lender, to get the loan terms that best suit himself.

Efficiency and reduced costs—As described hereinabove, the apparatus1000 may be operated by entities which are not banks. Consequently,there may be eliminated the requirement of capital reserves foroperating a bank. There may be a significant reduction in the need forcapital requirements involved in the operation of a bank, forexample—there is no need to rent many offices, as a bank does for itsbranches. There may also be allowed competitive sourcing of many of theservices related to the loan markets. As a result, there may be cutcosts involving personnel, and there may be leveraged existing-resourcesof other service providers, such as local realtors, accountants,mortgage brokers, lawyers, insurance agents, etc.

Optimal, customized, and multi-dimensional risk management—The apparatus1000 may allow each lender to define his alternative customized loanprofiles, based on an unlimited set of parameters. Such parameters mayinclude, for instance: economic classifications of the borrower, thecollaterals requested, the geographic location of the borrower, thirdparty rating service providers the lender prefers to use and conditionsimposed on the rating provided by the rating service providers, lender'sexposure in other loans he already made, external markets data,commodity prices, exchange rates, weather condition information (say,when lending to a borrower in an hurricane prone geographical region),any other factor that may influence a lending decision. etc.

The lender may apply his risk assessment to each such profile, and setthe price (interest rate) accordingly. The lender may also use thesystem to check the demand for loans in each profile, and decide whichof few alternative sets of loan profile/price he is going to choose,based on his individual risk assessment, given such a granular andmulti-dimensional ability to select borrowers, as taught in preferredembodiments of the present invention. However, the match isautomatically generated, according to the criteria set by the lender(s)and borrower(s), as described in further detail hereinabove.

The methods introduced by the present invention aim at providing a waybetter than current methods. With current methods interest rates arebased on a very few parameters mixed by a bank into a very broad averageloss ratio.

The present embodiments may enable a lender to define and maintain hisloan profiles in a very efficient way. Preferably, a lender is able tochoose standard general profiles from a library, modify them as hewishes and store them as personalized lender specific profiles. Specialcalculators and management tools may also be provided, for allowing alender to combine profiles. Other tools may provide standard assessmentand pricing algorithms. The lender is able to enter his own parametersinto general algorithms and use them to calculate his asked price,assess his risk involved, etc.

The present embodiments may further enable the lender to introduceflexible conditions, including external conditions, into a profile, orinto a lending order, as described in further detail hereinabove. Forexample, a lending order issued by a car manufacturer may include anexternal condition that the overall sum the car manufacturer lends to acertain car buyer does not exceed a certain percentage of the price ofthe car, including discounts.

Global exposure—Utilizing the apparatus 1000 described hereinabove,there is provided a method to enable multiple entities (borrowers,lenders, etc), spread all over the globe, to participate in a globalloan market comprising multiple smaller loan markets (say, when theapparatus 1000 is implemented as a part a web site). The global marketwhere the multiple entities may act simultaneously creates liquidity andenhances exposure of lenders, borrowers, and service providersworldwide.

A multiplicity of focused loan markets—The apparatus 1000 may provide amethod to enable cooperation between multiple focused loan markets, sayusing the external market interface manager. Each focus loan market is aloan market specializing in a certain sector of the economy. Forexample, there may be a loan market specializing in the energy sectorwhere special aspects relating to the oil business sector, such as theprice of a crude oil barrel (updated in real time) are addressed, etc.

Transparency—A system according to a preferred embodiment of the presentinvention is built in a way that enables (but not necessitates) theprovision of transparency on a selective basis. The apparatus 1000enables to document and show regulators and authorized parties theconsistency and fairness of the matching process. The apparatus 1000 mayalso enable to provide confidentiality to borrowers and lender, so as toallow the borrowers and lenders to feel they receive a consistent andfair treatment.

Operations management is the system administrator—sets system parameterssuch as how often does it do matching, and provides reporting.

It is expected that during the life of this patent many relevant devicesand systems will be developed and the scope of the terms herein,particularly of the terms “Internet”, “web”, and “Network”, is intendedto include all such new technologies a priori.

Additional objects, advantages, and novel features of the presentinvention will become apparent to one ordinarily skilled in the art uponexamination of the following examples, which are not intended to belimiting. Additionally, each of the various embodiments and aspects ofthe present invention as delineated hereinabove and as claimed in theclaims section below finds experimental support in the followingexamples.

It is appreciated that certain features of the invention, which are, forclarity, described in the context of separate embodiments, may also beprovided in combination in a single embodiment. Conversely, variousfeatures of the invention, which are, for brevity, described in thecontext of a single embodiment, may also be provided separately or inany suitable sub-combination.

Although the invention has been described in conjunction with specificembodiments thereof, it is evident that many alternatives, modificationsand variations will be apparent to those skilled in the art.Accordingly, it is intended to embrace all such alternatives,modifications and variations that fall within the spirit and broad scopeof the appended claims. All publications, patents and patentapplications mentioned in this specification are herein incorporated intheir entirety by reference into the specification, to the same extentas if each individual publication, patent or patent application wasspecifically and individually indicated to be incorporated herein byreference. In addition, citation or identification of any reference inthis application shall not be construed as an admission that suchreference is available as prior art to the present invention.

1. A computer-implemented method, comprising: receiving a plurality ofborrowing orders from a plurality of borrowers; receiving a plurality oflending orders from a plurality of lenders; receiving at least onesubsidizer order from a loan subsidizer that includes one or more loansubsidizing terms; executing a matching algorithm to match at least someof the borrowing orders with at least some of the lending orders,wherein the result of the executed match is affected by the existence ofthe at least one subsidizer order.
 2. The computer-implemented method ofclaim 1, wherein executing the matching algorithm comprises determiningif a particular borrowing order of the plurality of borrowing orders iseligible for a loan subsidy based on the loan subsidizing terms includedin the subsidizer order.
 3. The computer-implemented method of claim 2,wherein executing the matching algorithm further comprises automaticallymatching the particular borrowing order with a lending order and asubsidizer order to generate an atomic loan if the borrowing ordersatisfies the subsidizing terms included in the at least one subsidizerorder.
 4. The computer-implemented method of claim 1, wherein thesubsidizing terms include a profile of borrowers and a level ofsubsidizing.
 5. The computer-implemented method of claim 1, wherein theborrowing order comprises a subsidy request.
 6. The computer-implementedmethod of claim 4, further comprising automatically verifyingeligibility of the subsidy request.
 7. The computer-implemented methodof claim 4, further comprising verifying, by a lending agent, theeligibility of the subsidy request.
 8. The computer-implemented methodof claim 1, further comprising: collecting funds from the subsidizer;and distributing the funds according to the subsidizing terms.
 9. Thecomputer-implemented method of claim 1, further comprising routing theatomic loan to an agent to confirm one or more details of the subsidizerorder.
 10. The computer-implemented method of claim 1, wherein the loansubsidizer comprises a government agency.
 11. The computer-implementedmethod of claim 1, wherein the loan subsidizer comprises a commercialorganization.
 12. The computer-implemented method of claim 1, whereinthe subsidizing terms include one or more of a method of subsidyoffered, a method of verifying a borrower's entitlement to the subsidy,a period in which the subsidy is available, specific subsidy conditions,a method of calculating an amount of subsidy, a method of paying thesubsidy, and a total amount of cash covered by the subsidy offer.
 13. Anapparatus comprising: a borrowing order receiver configured to receive aplurality of borrowing orders from a plurality of borrowers; a lendingorder receiver configured to receive a plurality of lending orders froma plurality of lenders; a subsidizer order receiver configured toreceive at least one subsidizer order from a loan subsidizer thatincludes one or more loan subsidizing terms; and a matcher, associatedwith the borrowing order receiver, the lending order receiver, and thesubsidizer order receiver, and configured to execute a matchingalgorithm to match at least some of the borrowing orders with at leastsome of the lending orders, wherein the result of the executed match isaffected by the existence of the at least one subsidizer order.
 14. Theapparatus of claim 13, wherein the matcher is configured to execute thematching algorithm by determining if a particular borrowing order of theplurality of borrowing orders is eligible for a loan subsidy based onthe loan subsidizing terms included in the subsidizer order.
 15. Theapparatus of claim 14, wherein the matcher is further configured toexecute the matching algorithm by automatically matching the particularborrowing order with a lending order and a subsidizer order to generatean atomic loan if the borrowing order satisfies the subsidizing termsincluded in the at least one subsidizer order.
 16. The apparatus ofclaim 13, wherein the subsidizing terms include a profile of borrowersand a level of subsidizing.
 17. The apparatus of claim 13, wherein theborrowing order comprises a subsidy request.
 18. The apparatus of claim13, wherein the borrowing order receiver is further configured toautomatically verify eligibility of the subsidy request.
 19. Theapparatus of claim 13, wherein the borrowing order receiver is furtherconfigured to verify, by way of a lending agent, the eligibility of thesubsidy request.
 20. The apparatus of claim 13, further comprising: acollection manager, associated with the borrowing order receiver, thelending order receiver, the subsidizer order receiver, and the matcher,and configured to collect funds from the subsidizer; and distribute thefunds according to the subsidizing terms.